External Environment
A key acronym that is found when looking into strategic management is PEST. This refers to the key external influences that need to be considered within the organisation which are Political, Economic, Social and Technological. The PEST analysis can be enhanced by having a specific Business dimension which then his referred to as BPEST, which ensures that suppliers, competitors and shareholders are included. A BPEST analysis will give a comprehensive review of the external environment which will consider all of the separate functions and departments across the organisation.
Business takes into account the state of the industry both current and projected. It looks at the current and projected demand as well as the buyers behaviours in different market segments. There is also analysis of competitors to the organisation in terms of the market share, mergers, failures, alternative products and newcomers. Suppliers also influence the business sector in terms of reliability and alternative sources.
Political takes into account the pressure on the organisation from legislation in terms of company law and employment laws. Also government policies on company taxes has to be considered along with the amount of support enterprises get. Managers need to be aware of developments in the EU that can affect the market and also major political changes that could occur.
Economic looks in detail at all the aspects to do with interest rates, inflation, exchange rates and employment levels. Consideration is also given to the economies of the rest of the world especially the US economy.
Social aspects can affect the organisation with changes in population, and skill levels. There are also changes in spending patterns, customer confidence and peoples attitudes that affect the organisation.
Technological developments in terms of IT, industrial applications and new energy sources all lead to the organisation having to think about the external influences.